Wednesday, May 23, 2018

Little-Known Accounting Policy Could Fuel Green Infrastructure Surge

...In the water world, most big infrastructure projects like treatment facilities and pipelines are usually financed by water agencies selling bonds, which can help them raise millions of dollars for a project that only needs to be paid off a little bit at a time over many years. That’s because these projects are owned by the agencies and are considered an asset on which they can capitalize. But turf removal programs, green roofs and other localized water projects that can have significant impact on water consumption – often referred to as “distributed infrastructure” – weren’t typically considered an asset because they weren’t actually owned by an agency. Instead rebates for these kinds of projects were funded from operating budgets, which often isn’t enough to really scale such efforts. But the Government Accounting Standards Board (GASB), which is an independent organization that establishes accounting and financial standards, approved a policy implementation guide on May 7. This time one of the guidelines it addressed was Statement No. 62 (also referred to in shorthand as GASB 62). GASB 62 has actually been around for years, but it wasn’t well known. That prompted GASB this month to clarify the language around “business-type activities” of public agencies. “There is a universe of things that public agencies spend money on. Some of it is straightforward: If you’re buying chemicals every year, that’s an annual expense, and if you’re building a treatment facility, that’s a capital asset,” said Cynthia Koehler, executive director of the San Francisco-based nonprofit WaterNow Alliance and board member of the Marin Municipal Water District. “In between are things that GASB recognizes as ‘business type activities’ of public agencies.” GASB also refers to these as “regulated operations,” and GASB 62 says that it’s possible for these regulated operations to be considered assets that can be capitalized. While this language may be new to many folks not in the accounting world, what it means in the real world is that many water agencies will now be able to use bonds to fund things they didn’t typically consider an asset before. In particular, distributed infrastructure projects. It’s “potentially a massive game changer,” said Koehler...MORE

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